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Showing posts with the label Government Debt

THE CONGRESSIONAL BUDGET OFFICE (CBO) FORECASTS THE FUTURE

  According to the latest Congressional Budget Office (CBO) long-range forecast, government revenue will be $1.3 trillion more in 2030 than in 2020. Government debt will increase $10 trillion, from $30 trillion to $40 trillion in the same time period. If the average interest rate in 2030 is 4%, below the long-term average of 5%, then interest on the national debt in 2030 will be about $1.0 trillion higher than in 2022. Thus, most of the increase in federal tax revenue will go to pay for the increased interest expense on the national debt.   In every year in this interval, the deficit - the increase in the national debt - will be greater than the increase in revenue.   If the national debt rises to $50 trillion over the next eight years, as some analysts expect, then the increase in interest expense, at 4%, will be about $1.4 trillion. Thus, all the increase in revenue will just pay for the increase in interest expense.   CBO forecast is probably optimistic. By law, the forecast cannot

After the Virus: Economic Consequences

There are a number of forecasts of what the world will be like after the virus. Let’s take a look at some of them. Many long-term trends have been accelerated by the virus.  Probably the most cited example has been the accelerated move to digital-based transactions and behavior. This has occurred among both consumers and businesses. I think we have hit an inflection point. Before, there was a great deal of discussion about how one industry or market was becoming more dependent on digital platforms and automation based on artificial intelligence. The Internet of Things, online shopping and ordering, business conferencing, telemedicine. Or how a particular company was transforming an industry (Amazon, Uber). But now we see that the entire economy –  al l industries and markets – rely on digital. The technology and rapid adaptation are accelerating the shifts. Income inequality is bad and probably getting worse.  The usual reasons given are outsourcing in the global econo